Your employer is doing it wrong. A car allowance should be added to box 1 of your W2 as taxable income. Ideally your employer issues you a corrected W2 and a corrected 1099-MISC showing $0.
Assuming that's not going to happen, enter the 1099-MISC, in TurboTax. When asked why you got this, answer "nonbusiness income from the rental of personal property". You cannot deduct your mileage directly from the income. You are allowed to deduct your mileage (53.5 cents per mile for 2017) and other job expenses. TurboTax completes form 2106, which then carries to Miscellaneous itemized deductions on Schedule A. The problem with this is that you only get to deduct that portion of your expenses that exceed 2% of your AGI; and then only if your total itemized deductions exceed the standard deduction. Since your reimbursement is in after tax money, reported on your W-2 or 1099-MISC, the reimbursement does not have to be entered in TurboTax and shown on form 2106.
To record your mileage for your job related car expenses in TurboTax:
- Federal Tab (Personal for H&B version)
- Deductions & Credits
- I'll choose what I work on
- Scroll down to: Employment Expenses > Job related expenses
This is the correct way to enter this income and the applicable job related deduction.
